A region of opportunity for businesses, Latin American countries offer multinationals affordable labor, low infrastructure costs and incentives. Despite the rewards, this region also serves as one of the most complex environments for businesses to operate due to governments’ mandated e-invoicing and tax reporting compliance initiatives. Over the last decade, LATAM’s largest economies – specifically Brazil and Mexico – have paved the way for other emerging markets like Colombia and Peru to mandate electronic processes for the collection and validation of business transactions and tax reporting. What started with standardized electronic invoicing requirements has since expanded into fiscal reporting, with compliance requirements now impacting accounting, human resources and logistics. Latin America is certainly leading the way in the global shift toward business-to-government requirements, with the end goal of significantly increasing transparency in order to eliminate tax evasion and fraud. Multinationals who fail to proactively manage compliance risk significant fines, shipping delays and operational shutdowns.
In an effort to better understand the challenges faced by companies operating in Latin America, we teamed up with leading Latin American business publication America Economia to survey 650 business executives. Respondents representing a wide range of industries – from consulting and banking to retail and manufacturing to telecommunications and logistics – agreed that the compliance landscape is a significant factor in their business outlooks. Here are some of the findings that explain why:
- 38.5% have had a delay in operations resulting from an invoice error
- 15.4% have faced penalties or temporary shutdowns as a result of a government tax audit or compliance error
The first step to mitigating these risks is staying up to date on regulation changes and requirement specifics. Yet that’s easier said than done. Compliance updates are often complex, frequent and issued in local, technical language – a challenge for multinationals to interpret. Our survey found that nearly half – 49.2% – of all respondents have little or no understanding of new mandates in some of the most complex Latin American countries: Brazil, Mexico, Colombia and Peru.
The survey also revealed how companies are currently managing compliance:
- The Internal Approach
Many multinationals, especially those with dedicated compliance teams, initially strive to stay up to date on new compliance initiatives themselves, ultimately risking missed deadlines, inaccurate reporting formats and other errors. Since Latin American compliance initiatives are among the most complex in the world, and are updated frequently, companies managing updates internally often miss opportunities to streamline processes by outsourcing these critical updates to a knowledgeable compliance partner.
- The Multiple (Local) Vendor Approach
According to our survey, a large portion of respondents (73.1%) are handling e-invoicing and fiscal reporting requirements at the local level, meaning they must work with a different compliance vendor in each region in which they operate or create their own internal systems for each market. The challenges with this approach include the inefficiencies resulting from working with potentially several disparate vendors, language barriers and varied cost structures.
- The Centralized Compliance Approach
The most streamlined option, reliance on a regional compliance partner that understands individual requirements on a local level for multiple countries eliminates frustrations mentioned in the two approaches above. By working with a compliance partner that understands their needs on a global level, but also possesses localized knowledge and support, multinationals safeguard against compliance risks. Further, with automatic updates and the ability to dedicate resources to the areas that matter most (business strategy, innovation and performance), companies can be confident in their compliance initiatives.
Click here to view the complete survey results and learn the key challenges faced by companies operating Latin America, as well as how the most proactive global enterprises are addressing these challenges head on.
The post New Research Reveals 50% of Companies in Latin America Don’t Understand New E-Invoicing Mandates appeared first on Sovos Compliance.
About the Author
Steve Sprague's electronic invoicing and middleware integration expertise stems from nearly twenty years of experience in the industry. As General Manager of Invoiceware by Sovos, Mr. Sprague manages global messaging, product strategy and field enablement which has led to the firm’s double-digit revenue/sales growth in the last three years.More Content by Steve Sprague